Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

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christianpyro
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Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Tue Apr 06, 2021 5:41 pm

I am posting this here, because I feel it will affect most of us as collectors, and it is an important change that everyone needs to be aware of. If the mods wish to move it, that is fine, and I apologize if I stepped out of bounds.

There is a New tax law that requires payment processors (Ebay, Paypal, etc.) to send out a 1099-K to anyone who collects $600 or more. You will have to pay taxes on that.

This is part of H.R.1319 - American Rescue Plan Act of 2021 Section 9674 - Link:
https://www.congress.gov/bill/117th-con ... F9A98A4109


Key points:
  • Where you supposed to be doing this all along and paying taxes on profits? Yes, but a lot of folks were not, and will now be forced to. You never had to pay taxes on losses (where you sold something for less than you paid), but now you will have to track that data for tax purposes.
  • This starts January 2022. So this year is fine, but next year the change takes place. January 2023 you will receive a 1099-k from payment processors based on sales from 2022 (if you sell over $600 with that Payment Processor). This will be part of your 2022 taxes.
  • The 1099-K is for all payment received. So if you sell something on Ebay, for $10 plus $6 shipping, and the buyer pays $2 in taxes (collected by Ebay on your behalf), a total of $18. You will be taxed on the full $18.
  • Expenses are deductible and you will have to track them. Taxes collected and paid on your behalf by ebay, shipping costs, fees, packing materials, even mileage to and from the post office, the original purchase price of the item you are selling, etc. You will need to collect all of that information, and be able to prove it in case of an audit.
  • One problem: Many of us do not have our original purchase receipts. So deducting that may not be possible.
  • The taxable income may be very small if you track and have receipts for all expenses.


Please note I am not a tax expert. Maybe some here is, and can elaborate, but I wanted to put out this information for discussion.

This is going to have an impact on collectors as a whole, whether you sell or not. A lot of folks will no longer want to bother with online sales and have to deal with taxes. That’s going to limit the products available on the second hand market, and limit the kinds of sellers willing to deal with all of this. I have a feeling that in time, second hand prices may rise as there is less competition from regular Joes.

Buy a wave of Marvel Legends for the BAF and decide to sell off the unwanted figures, and now you may have to deal with tracking expenses and paying taxes (if you sell $600 worth). That’s another hurdle that a lot of folks may not want to deal with. It’s easy to get to $600 too, that’s just $50 in sales a month.

I would be interested to hear your thoughts, and how you think this will affect the collecting community as a whole



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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Tue Apr 06, 2021 5:55 pm

Been expecting this for some time. Not surprised, but not thrilled with it. I think the threshold should be $2,000 or more.
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Re: Sellers will be sent 1099-K if they sell $600 + starting 2022

Tue Apr 06, 2021 5:58 pm

It will be interesting to see what that does ultimately. Will it cause an increase in overseas sellers (from China for instance) as they wouldn't beholden to those tax laws.

I could see average Joe's dropping out of selling if they get word of this...thus causing less items to be on ebay, which would drive up prices. Prices would also be driven up by sellers wanting to make sure their margins stay the same after taxes. But...with prices of stuff going up, it would once again be worth it for average joes to sell again on ebay...which might bring the market back down.

My guess, very little changes. ebay upped their fees a while back and I'm not sure much really changed when that happened. This would have a similar effect I'd imagine. And honestly, even if you're selling over $600 worth of stuff and have to pay taxes on it, most people are just going to fudge the numbers the best they can. Are they really going to audit someone who made $600 worth in sales over what could amount to be a few dollars off on their taxes? Nope. They will take what tax money then can and call it a day. Now they might look a little more closely at those who are making a lot more than $600 on ebay. But in reality they probably wont look at anyone too closely unless the sales are more like a full income. It's like anything else in the tax code, there are a enough right offs that you can get away with without raising any flags. Someone could reasonably say they spent $60 in shipping supplies and not really need receipts to absolutely prove it. It's reasonable to guess that boxes/bubble wrap/gas etc might cost $60 in shipping expenses and the amount of work to audit someone over that amount versus the potential payoff just isn't worth it for them. They bill their time at a higher rate than that.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Tue Apr 06, 2021 6:01 pm

I think one big issue is that folks will get a 1099 and not know what it is for, so they will discard it and not report it on taxes. The IRS has a copy of that 1099, so you will get flagged for not reporting on it.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Tue Apr 06, 2021 6:03 pm

Honestly surprised it took this long. $600 has long been the threshold for taxes, though--once upon a time when I was younger and prettier, I modeled for a book cover and got exactly $600 for it, and the poor artist who hired me had to send me the paperwork after the fact (and for that kind of work, I think I paid something wild like $250 in taxes!). The artist then began to pay his models $595 for one-off shoots. It didn't help if they did a bunch of shoots, but if you only did one with that artist a year, it saved on paperwork for him and made us more money.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Tue Apr 06, 2021 6:14 pm

$600 has long been the threshold....but how many people have been reporting their ebay sales? And how many people have been getting flagged by it? $600 does seem like a low number and I agree it should be higher but it sounds like it's in keeping with the number we have historically used.

I have a feeling a lot of people will throw it away like you said....and for a lot of people it wont matter. I still think they will really only go after the people who are making decent money and skipping on their taxes. It's just not worth it to go after little fish. It's like trying to go after people for garage sales or craigslist. Unless it's a full-time business, it's just a headache for them.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Tue Apr 06, 2021 6:54 pm

I have to supply a 1099 to any developers or designers I use who earn more than $600/year from my business, so honestly I think this is fair and in line with the rest of the country. It's still income, and you have to pay tax on it.

I'm not sure, but if you're tracking expenses as well, it's possible that could expense toy purchases, which could negate the taxable income. I'd ask an accountant on that one.

On the bright side, maybe this will mean more exclusives on the shelf and less scalpers (wishful thinking).
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Tue Apr 06, 2021 6:56 pm

This mostly just gives the IRS additional leverage should they happen to audit someone making a decent amount of money on eBay. Audits are mostly random, though it's possible they'll build an algorithm in year one of this that flags people with income over "X" amount through the likes of eBay based on 1099 information received from those platforms. Otherwise, your risk of audit is still quite low, and if you do get audited, you'll want to have a solid paper trail or else the IRS is just going to bully you into handing over more money. I don't think it will necessarily affect listings as if you have something to sell, you want to get money for it, taxed or not. It might push people to different spaces to offload stuff, but if the return isn't as good as it would be on eBay/mercari/etc. then they'll ultimately list there. I'm actually really surprised it took this long for this to happen as casinos have been doing this for years now.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Tue Apr 06, 2021 8:14 pm

Probably more tax cheat money out there for the IRS to go after from online streamers and cam models, but ultimately there's nothing wrong with this per se. I don't see a big impact on the seller community on ebay. Maybe tighter knit circles on forums will switch to the "send as a gift" option on Paypal to skirt some of this but even then it's far too great of a risk for general practice. And it's no guarantee that there aren't "send as a gift" thresholds that flag your account anyways.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Tue Apr 06, 2021 8:38 pm

Mister Skeezler wrote:
Tue Apr 06, 2021 6:54 pm
I have to supply a 1099 to any developers or designers I use who earn more than $600/year from my business, so honestly I think this is fair and in line with the rest of the country. It's still income, and you have to pay tax on it.

I'm not sure, but if you're tracking expenses as well, it's possible that could expense toy purchases, which could negate the taxable income. I'd ask an accountant on that one.

On the bright side, maybe this will mean more exclusives on the shelf and less scalpers (wishful thinking).
Toy purchases would likely be a tough sell as expenses, unless you had an active business in reselling, in which case you're probably making well more than $600/year with it. Hopefully anyway, if you're really making a go of it. So you need proof that the purchases are part of an active business effort to generate profit. Otherwise toy purchases would just fall under the passive hobby categorization and couldn't be used as deductions against taxable income.

But like others have said, if you're just barely reaching the $600 threshold, reselling a thing or two here or there, you're probably pretty safe. Unless you have the bad luck of being randomly chosen for an audit. Or raise other, more significant, red flags that draw attention to you. Not that I recommend fudging things at all, though, really.

This is probably just the beginning of more tax hikes in the near future to try to help recover some of what's been lost in the past year. And reselling/scalping is a relatively untapped potential of a tax source. Maybe it will discourage some scalpers, but probably not nearly enough to see a noticeable difference. Would be nice though.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Tue Apr 06, 2021 8:44 pm

garbage. tax a billionaire, not me. smh
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Tue Apr 06, 2021 8:45 pm

One thing I did not mention is that I assumed all here selling were doing so as a hobby. If doing so as a business (buying products to resell) then there are additional taxes owed. Self Employment taxes.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Tue Apr 06, 2021 8:56 pm

I have things to sell, but I never get around to it. I try to trade first.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Tue Apr 06, 2021 9:15 pm

TinkerersAssistant02 wrote:
Tue Apr 06, 2021 8:38 pm
Mister Skeezler wrote:
Tue Apr 06, 2021 6:54 pm
I have to supply a 1099 to any developers or designers I use who earn more than $600/year from my business, so honestly I think this is fair and in line with the rest of the country. It's still income, and you have to pay tax on it.

I'm not sure, but if you're tracking expenses as well, it's possible that could expense toy purchases, which could negate the taxable income. I'd ask an accountant on that one.

On the bright side, maybe this will mean more exclusives on the shelf and less scalpers (wishful thinking).
Toy purchases would likely be a tough sell as expenses, unless you had an active business in reselling, in which case you're probably making well more than $600/year with it. Hopefully anyway, if you're really making a go of it. So you need proof that the purchases are part of an active business effort to generate profit. Otherwise toy purchases would just fall under the passive hobby categorization and couldn't be used as deductions against taxable income.

But like others have said, if you're just barely reaching the $600 threshold, reselling a thing or two here or there, you're probably pretty safe. Unless you have the bad luck of being randomly chosen for an audit. Or raise other, more significant, red flags that draw attention to you. Not that I recommend fudging things at all, though, really.

This is probably just the beginning of more tax hikes in the near future to try to help recover some of what's been lost in the past year. And reselling/scalping is a relatively untapped potential of a tax source. Maybe it will discourage some scalpers, but probably not nearly enough to see a noticeable difference. Would be nice though.
You can write-off the cost of the items sold, plus the shipping, fees, etc. Like a lot of wealthy individuals, you could get creative in how you write-down your income. I don't think it would be as easy as being able to utilize unrealized loss, but maybe you have something lying around that you don't want that you paid 50 bucks for that has not retained its value. You could toss it on eBay and sell it cheap and record it as a loss on your taxes as part of your eBay income. I wouldn't recommend doing that because if you were to get audited then you'd probably have to get into arguments about depreciation and such, but you might see some savvy scalpers selling off their old Dyson vacuum they paid 600 bucks for once upon a time that no one will pay more than a hundred for now to try and pull a fast one. People will try anything to avoid paying taxes.
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Re: Sellers will be sent a 1099 (taxable income) if they sell $600 + starting 2022

Tue Apr 06, 2021 10:52 pm

So they are going to start tracking these sales. in January?

I have a ton of stuff I've been planning on getting rid of. Just wondering how long I have to do it.

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